Assessment order annulled for 1979-80 due to procedural errors, emphasizing compliance importance

The court held that the assessment order for the year 1979-80 was annulled due to non-compliance with mandatory procedures, rendering it unsustainable and barred by limitation. It emphasized the importance of following prescribed procedures, distinguishing between procedural breaches and substantive rights. The court clarified that the breach in this case was procedural, not a violation of natural justice principles, and highlighted the curable nature of procedural violations in assessment proceedings. The court's decision underscored the significance of adherence to procedural requirements for fairness and legality in assessment processes.

---

---

Issues:
1. Assessment made by the Income-tax Officer being barred by limitation.
2. Correctness of annulling the assessment instead of setting it aside and following the procedure under section 144B.
3. Violation of principles of natural justice in making the assessment order.

Analysis:

Issue 1: Assessment Barred by Limitation
For the assessment year 1979-80, the assessee filed a return on July 23, 1980. The Income-tax Officer sent a draft assessment order on March 29, 1982, before the expiry of the two-year period. However, the assessment order was made on April 24, 1982, without following the procedure under section 144B. The Tribunal held that the order was annulled due to non-compliance with the mandatory procedure. The Third Member also found the assessment barred by limitation. The court agreed that the order was unsustainable due to lack of jurisdiction, preventing the Revenue from extending the assessment period beyond the statutory limit.

Issue 2: Correctness of Annulling the Assessment
The assessee challenged the assessment order on the grounds of non-compliance with section 144B and breach of natural justice. The court found that the breach was procedural and not substantive, allowing the assessment to be set aside and continued from the stage of the illegality. The court disagreed with the view that the order was a nullity, emphasizing that the provision of section 144B is procedural and curable. The court highlighted the importance of following the prescribed procedure for assessment, which includes objection filing and Inspecting Assistant Commissioner's involvement.

Issue 3: Violation of Principles of Natural Justice
The court clarified that the breach in this case was the assessee's statutory right to be heard by the Inspecting Assistant Commissioner, not a violation of natural justice principles. The court differentiated between procedural breaches and substantive rights, stating that the breach of procedure can be rectified by setting aside the order and continuing the assessment process. The court referenced various High Court decisions to support the distinction between procedural breaches and substantive rights, emphasizing the curable nature of procedural violations in assessment proceedings.

In conclusion, the court answered the questions raised by both the Revenue and the assessee, emphasizing the importance of following procedural requirements in assessment proceedings to ensure fairness and legality.

---